The Defense Department has reversed a directive issued last month to stop selling used ammunition shells to manufacturers, after gun owners and Montana's two U.S. senators complained that it would increase the cost of ammunition and kill a revenue-generating program for the government.

"Prohibiting the sale of fired military brass would reduce the supply of ammunition -- preventing individual gun owners from fully exercising their Second Amendment right to keep and bear arms," Montana Senators Jon Tester and Max Baucus, both of whom are Democrats, wrote in a letter to Vice Admiral Alan S. Thompson, head of the Defense Logistics Agency.

The DOD had been reviewing the resale policies for thousands of military items, and used small arms munitions cases were "inadvertently" put in a category that did not allow resale unless it was shredded first, explained Ken MacNevin, a spokesman for the Defense Reutilization and Marketing Agency.

He said the Defense Department probably would have reversed the directive eventually, even without the pressure from the senators and gun enthusiasts.

"Whenever we have people correspond, we pay attention. But this would have been resolved regardless," MacNevin said.

Larry Haynie, the owner of Georgia Arms, an ammunition manufacturing company, said the directive would have had a catastrophic impact on his business -- forcing him to lay off half of his 60 employees -- and he was not convinced that the Defense Department would have resolved the issue on its own.

"It was because of the political firestorm we created by bringing this to the attention of the public .... They would have let it stand had we not said anything," Haynie told FOXNews.com.

He estimated that small arms ammunition prices would have doubled within three months had the directive stayed in place, because manufacturers were already operating at full capacity due to wars in Iraq and Afghanistan and an increase in civilian sales.

It was also a good money-saving move for the DOD, he said.

"[We] also took a stand for economic common sense in a time when we know our government should be trying to reduce costs at all levels rather than throwing money away for some politically correct reason or the other," he said in a statement on his company's Web site.

MacNevin said he could not comment on the effect the directive would have had on the price of live ammunition, but he agreed that selling the shells brings in revenue.

He added that the directive was finalized last fall and was only implemented in February, contradicting rumors that it had been an objective of the Obama administration.

The Brady Campaign to Prevent Gun Violence declined to comment on the issue. The National Rifle Association expressed its support.

"A problem that could have had serious repercussions for the remanufactured ammunition industry and the countless gun owners who support it, appears to have been resolved quickly," chief lobbyist Chris Cox said in a press release.

Montana's senators also said they were happy with the reversal.

"I'm glad the Defense Logistics Agency got the message because let's face it, a gun isn't really a gun without the ammo," Tester said in a statement to FOXNews.com. 

"When you put limits on ammunition, you put limits on firearms, and any limit on the rights of law-abiding gun owners violates Constitutional rights."